Financing and Credit Risk Rating for Off-Grid Solar in Africa — Kate Steel, Co-founder & COO of Nithio
Led by Kate Steel, Nithio is using data science to build a platform for evaluating credit risk and facilitating institutional investment towards off-grid energy solutions in Africa.
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Where did the name Nithio come from?
Nithio comes from the Egyptian Goddess Neith who wove the universe together, which implies a lot of ambition for us (chuckling).
What is Nithio and what makes the company unique?
Our mission is to unlock financing at scale for energy access in Africa. There are 600 million people in Africa who lack access to electricity. It is believed that about 300 million of these people would be best served by off-grid energy solutions. Fortunately, there is a strong off-grid solar market that offers a pre-packaged solution for many of these households. In addition, there is a robust pay-as-you-go financing structure layered on top of that. However, because these systems are not paid for up-front, there is some actual and perceived risk that must be managed to ensure the system is paid for in full over time. We are able to model and understand the consumer financing risk at the household level which enables investors to come off the bench and join the game, thereby fueling the deployment of this off grid solar and storage in Africa. Ultimately, we are creating an alternative credit model standard to unlock this broader financing potential.
How do you think about the work Nithio does in terms of its contribution to climate change avoidance, versus simply improving the standard of living of millions of human beings?
Nithio aspires to do both. While we certainly aim to improve the quality of life of traditionally underserved populations, there is also a large climate change adaptation and resilience component there as well. Much of Africa’s electricity is supplied by hydropower, which unfortunately as a consequence of climate change, is expected to become less reliable over time. Therefore, reducing a family’s dependence on the central power supply is beneficial for everyone in terms of managing grid load and reliable power supplies for these homes.
Can you talk about the shift from nonprofit and foundation work to for-profit venture-backed companies working in the off-grid electrification space?
I think the long-term sustainability of these off-grid solutions benefits from private involvement. When the party that installs a battery or a solar panel system has the incentive to provide high-quality customer service because their business’s survival depends upon it, the holistic ownership experience improves from the customer’s perspective. Nonetheless, there remains a large opportunity to increase the amount of private funding in this space, from large banks or other financial institutions, that is currently still dominated by development finance institutions or impact-focused capital. We believe that Nithio can be the platform for delivering both private capital, as well as directing grants and concessional capital to the households that need it most.
Can you talk about the various types of capital in the space and how Nithio fits into this bigger picture?
We are an intermediary for a blended financing facility. We welcome all types of risk profiles, including equity and debt investors, but would like to see more institutional capital. We operate as a capital conduit enabled by our analytics engine. There are a few market leaders in the off-grid solar space in Africa and a long tail of smaller and often local companies as well. We exist to provide funding for many of these companies as they grow and scale into bigger players.
What was your path to Nithio?
I have done many different things but always with the same goal. After finishing my undergraduate degree, I spent some time teaching in Kenya. This was my first experience with energy access problems. I decided this was a problem I wanted to work on and continued to get a graduate degree studying energy access solutions. I worked on some early World Bank initiatives in the space before then transitioning to Google where I worked on large-scale financing and energy access business models. Through this experience, it became clear that the private sector was not going to be able to solve this problem on its own, which led me back to D.C. with the Power Africa Initiative. The Power Africa Initiative was a very successful program, and we enabled many new connections and megawatts of new power. After a few years at Power Africa, I started talking to some of the founding team at Nithio and decided that the COO position at the company was too good of an opportunity to pass up, so I joined the team. I think we are addressing one of the key bottlenecks to robust markets for off-grid solutions, so I am very excited.
What is your vision for Nithio in 5 to 10 years?
We intend to scale all aspects of our platform. We certainly intend to grow the size of the funds that we are able to provide as working capital to the solar providers on the ground. In addition, we intend to increase the scope of the data that our models can ingest and analyze with the goal of eventually expanding beyond energy access, though this will remain our primary market in the near term. Ultimately, we believe in raising standards of living so we will expand into other markets including microfinance. However, for data quality reasons, not to mention the humanitarian scope of the problem, energy access is the right place to start.
Can you speak to challenges that you have faced as an entrepreneur?
I think the most obvious one is the enormous black swan event that we have experienced in the last year. There was initially a lot of fear that restrictions on movement and job loss would lead to massive defaults in existing loans and the essential shuttering of the off grid energy industry in parts of Africa. Fortunately, those fears have not materialized, and the sector has proven to be very resilient to many of these challenges. Repayment rates have remained steady and sales have stayed strong.
Do you have a book recommendation for others?
I really enjoyed Shoe Dog by Phil Knight who founded Nike. This story was a refreshing reminder that the entrepreneurial experience can be a slow burn rather than the stereotypical Silicon Valley overnight success. The book I read most recently that I’d recommend is Between Two Kingdoms which is about somebody who survives cancer and struggles to re-enter normal life. In some ways the whole country, and world, is in a health crisis and will also struggle to return to normalcy.
Do you have a quote that keeps you focused or motivated?
The quote I would recommend is a T.S Elliot quote that was actually my yearbook quote in high school. “We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time.” To me it still resonates because there are so many opportunities to address big problems in the world, but sometimes that exploration leads you back to a better understanding of your own situation.
Do you have a podcast that you would recommend?
I know it is standard, but How I built this with Guy Raz is one that I enjoy. It’s always interesting to learn the longer story and near-failures behind the success of some of the most recognizable companies in the world.
Any closing invitations or words for other entrepreneurs?
For those interested in the energy access area, we are hiring and growing quickly so if Nithio’s mission speaks to you, please reach out. More generally, we always welcome attention to the space of energy access and think that we can collaboratively work with those interested in the space. For entrepreneurs, I would simply say keep at it. There are so many angles at which we need to attack both energy access and climate change, so keep fighting in whatever regard you may be contributing. We all need to do our part.
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THE TORCH is an interview series from Entrepreneurs for Impact. We profile CEOs and investors mitigating climate change. Our goal is to highlight their work and inspire others. As we deal with multiple crisis, from Covid and racial injustice to climate change and economic recession, we need some of this positive light in what seem like dark times. Onward and upward.